ORDER The Income Tax Appellate Tribunal, New Delhi has referred to following question of law under section 256(2) of the Income Tax Act, 1961, (hereinafter referred to as 'the Act') for opinion of this court.
"Whether on the facts and in the circumstances of the case and despite the provisions of Explanation below clause (a) of sub-section (1) of section 44AC of the Income Tax Act, the I.T.A.T. is legally correct in holding that 'Nirgam Mulya' of Rs. 36,52,952 paid by the assessee could not be included in 'purchase price' for computing the profit under section 44AC of the Income Tax Act ?"
2. The present reference relates to the assessment year 1991-92.
2. The present reference relates to the assessment year 1991-92.
3. Briefly stated, the facts giving rise to the present reference are as follows:
3. Briefly stated, the facts giving rise to the present reference are as follows:
Assessee, a liquor contractor filed return for the assessment year 1991-92 declaring an income of Rs. 5,51,504. Invoking the provisions of section 44AC of the Income Tax Act, 1961 the assessing officer completed the assessment. The assessee had paid an amount of Rs. 5,76,222 for purchase of liquor, Rs. 7,45,684 for packing material (capsuling charges) and Rs. 81,82,860 for Bid-money, which in turn included a sum of Rs. 36,52,952 being the Nirgam Mulya. In view of the provisions of Explanation below clause (a) of section 44AC the assessing officer quantified the purchase price as under:
Purchase of liquor Purchase of liquor Rs. 5,76,222 Rs. 5,76,222 Capsuling charges Capsuling charges Rs. 7,45,684 Rs. 7,45,684 Nirgam Mulya Nirgam Mulya Rs. 36,52,952 Rs. 36,52,952 Rs. 49,74,858 Rs. 49,74,858 By applying a rate of 40 per cent as provided in section 44AC the assessing officer computed a profit of Rs. 19,89,943 and the assessment was completed on total income of Rs. 20,08,030.
4. Aggrieved with the above decision of the assessing officer, the assessee filed an appeal before the Commissioner (Appeals) in which he mainly referred to the amendment made by the U.P. Government in rule 2 of the U.P. Settlement of Country Liquor (Tender- cum-Auction) Rules by Ordinance No.83(2)XVV-V-12(KA) 1991 of 10-1-1991, according to which the Nirgam Mulya forms part of Bid money. On the basis of this amendment, it was contended by the assessee that Nirgam Mulya could not be considered as part of purchase price. The learned Commissioner (Appeals) dismissed the assessee's appeal and confirmed the assessing officer's order.
4. Aggrieved with the above decision of the assessing officer, the assessee filed an appeal before the Commissioner (Appeals) in which he mainly referred to the amendment made by the U.P. Government in rule 2 of the U.P. Settlement of Country Liquor (Tender- cum-Auction) Rules by Ordinance No.83(2)XVV-V-12(KA) 1991 of 10-1-1991, according to which the Nirgam Mulya forms part of Bid money. On the basis of this amendment, it was contended by the assessee that Nirgam Mulya could not be considered as part of purchase price. The learned Commissioner (Appeals) dismissed the assessee's appeal and confirmed the assessing officer's order.
5. During second appeal, the Tribunal allowed the assessee's plea mainly by placing reliance on its decision in the case of Naresh Babu Suresh Chandra, Kanpur v. Dy. CIT Spl. Range, Kanpur wherein it was held that 'Nirgam Mulya' could not be considered as purchase price as it formed part of 'bid money'.
5. During second appeal, the Tribunal allowed the assessee's plea mainly by placing reliance on its decision in the case of Naresh Babu Suresh Chandra, Kanpur v. Dy. CIT Spl. Range, Kanpur wherein it was held that 'Nirgam Mulya' could not be considered as purchase price as it formed part of 'bid money'.
6. As is evident, the department's stand is that the artificial meaning which the Ordinance dated 10-1-1991 referred to supra, gave to the term 'bid money' could not be imported for interpreting the provisions of section 44AC as in such a situation while Nirgam Mulya would not constitute a part of purchase price in the State of U.P., the same would be a part of the purchase price in other States.
6. As is evident, the department's stand is that the artificial meaning which the Ordinance dated 10-1-1991 referred to supra, gave to the term 'bid money' could not be imported for interpreting the provisions of section 44AC as in such a situation while Nirgam Mulya would not constitute a part of purchase price in the State of U.P., the same would be a part of the purchase price in other States.
7. Heard Sri R.K. Upadhyaya, learned standing counsel for the revenue. No body has appeared for the respondent-assessee.
7. Heard Sri R.K. Upadhyaya, learned standing counsel for the revenue. No body has appeared for the respondent-assessee.
8. It may be mentioned here that the Apex Court in the case of Union of India v. A. Sanyasi Rao (1996) 219 ITR 330 (SC) has held that the provisions of section 44AC of the Act is applicable only in respect of section 206C of the Act. Tax at source is to be charged on the purchase of country liquor shop and it does not provide for making presumptive assessment. Apex Court held as follows:
8. It may be mentioned here that the Apex Court in the case of Union of India v. A. Sanyasi Rao (1996) 219 ITR 330 (SC) has held that the provisions of section 44AC of the Act is applicable only in respect of section 206C of the Act. Tax at source is to be charged on the purchase of country liquor shop and it does not provide for making presumptive assessment. Apex Court held as follows:
"We perused the aforesaid judgment of the Andhra Pradesh High Court with care and we hold that in view of the absence of materials, the court was justified in its view that the remedy specified by section 44AC is disproportionate to the evil that prevailed and so to the extent the non obstante clause in section 44AC excluded the provisions of sections 28 to 43C (applicable to all assessees), the provisions are unreasonable. We concur with the aforesaid conclusion of the Andhra Pradesh High Court on this aspect and hold that section 44AC is a valid piece of legislation and is an adjunct to and explanatory to section 206C. It does not dispense with the regular assessment, as provided in accordance with sections 28 to 43C of the Act. A direction will issue to that effect and to this limit extent the writ petitions, civil appeals and the special leave petitions filed by the assessees shall stand partly allowed. In all other aspects, the batch of cases shall stand dismissed. In the circumstances, of the case, there shall be no orders as to costs." (p. 357)
9. Regular assessment is to be made in accordance with the provisions of the Act and section 44AC of the Act has been restricted in its application to provision of section 206C of the Act.
9. Regular assessment is to be made in accordance with the provisions of the Act and section 44AC of the Act has been restricted in its application to provision of section 206C of the Act.
10. We find that the question referred to us is academic and therefore, is returned unanswered.
10. We find that the question referred to us is academic and therefore, is returned unanswered.